What are the best practices for merchandise performance evaluation?

1 Define your objectives and KPIs

Before you start evaluating your merchandise performance, you need to have a clear idea of what you want to achieve and how you will measure it. Depending on your retail format, category, and target market, you may have different objectives and key performance indicators (KPIs) for your merchandise. For example, some common objectives are to increase sales volume, margin, turnover, sell-through, or customer loyalty. Some common KPIs are sales per square foot, gross margin return on investment (GMROI), stock-to-sales ratio, markdown percentage, or conversion rate. You should align your objectives and KPIs with your overall business goals and budget.

3 Analyze your data and identify trends

Once you have your data ready, you need to analyze it and identify the trends and patterns that reveal how your merchandise is performing. You can use various tools and techniques, such as charts, tables, dashboards, or statistical methods, to visualize and interpret your data. You should look for the strengths and weaknesses of your merchandise performance, such as which products, categories, or brands are generating the most or least sales, margin, or turnover, or which products, categories, or brands are overstocked or understocked. You should also look for the opportunities and threats of your merchandise performance, such as which products, categories, or brands have the highest or lowest potential for growth, or which products, categories, or brands are facing the most or least competition or demand.

4 Implement your action plan and monitor your results

Based on your data analysis and trends identification, you need to implement an action plan to improve your merchandise performance. Your action plan should include specific and realistic actions that address the issues and opportunities that you have identified, such as adding, deleting, or modifying products, categories, or brands, adjusting your inventory levels or pricing strategies, launching or changing your promotions or displays, or enhancing your customer service or experience. You should also monitor your results and track your progress by measuring your KPIs and comparing them with your objectives and benchmarks.

5 Review and refine your process

Finally, you need to review and refine your merchandise performance evaluation process on a regular basis. You should evaluate the effectiveness and efficiency of your process, such as how well it helps you achieve your objectives, how often you conduct it, how much time and resources it consumes, or how easy or difficult it is to execute. You should also seek feedback and suggestions from your stakeholders, such as your managers, employees, customers, or suppliers, on how to improve your process. You should then make the necessary changes and improvements to your process and repeat it as needed.